francine: billions from beijing. the u.s. and china announce a quarter trillion dollars of nonbinding deals. how many books will make it back stateside. exit hardball. britain resumes brexit talks in brussels. howard marks what's up the divergence between bond market pricing and lackluster economic growth. should investors be concerned? good morning, everyone. this is "bloomberg surveillance." i am francine lacqua.

the future for the banking world and the political escape. the exclusive conversation at 9:30 a.m. london time. in the meantime, let's check on your markets. this is what i am seeing. a lot of the talk will be on burberry after the company put out an announcement that maybe was interpreted in the markets. they didn't see anything worth buying the stock. it is down here in europe. the european stocks taking their cue from quite a volatile session in asian markets. the dollar flat. treasuries flat as trump challenges china over unfair trade practices. .ere is nejra cehic nejra: in the u.s., republicans on the house ways and means committee ames to -- aims to release their tax reform bill later today. speaking exclusively to

bloomberg, steve mnuchin stressed how crucial getting tax reform through is to the white house. >> this is the president's most important domestic agenda item. we are going to get this passed. the objective is to get it to the president's desk in december. nejra: the uk's government has lost its second cabinet member and a week. failed to tell prime minister theresa may but she held a series -- during a holiday in august. on tuesday, it was revealed that she rejected giving british aid money. ian mccafferty says clarity on brexit will be needed early next year to prevent banks starting to shift jobs out of the country. is bad that instability for business, investments and the economy. he says there will be some movement of banks out of london. institutions are making

contingency plans and will start to have to ask to that's have to act soon. -- have to ask soon. to dave western ahead of the latest rounds of negotiations. of exit, we are watching it closely. from our perspective, the prudent thing we have to do is we have to assume what has been termed as the hard brexit. meaning there is no transition and there's no sharing arrangements that are put in place because we have got to be open for business on the day for our customers and to make sure we can facilitate things they need to do. that is the way we are approaching it. nejra: global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg.

francine: president trump says china is taking advantage of american workers and companies with unfair trade practices. in beijing, he blamed his what us princesses for allowing a u.s. trade deficit to grow. speaking alongside president xi jinping he went on to say there's a good chemistry between the two leaders. today we have an all-star guest lineup. leading voices in investment and markets. jean boivin joins us. blackrock heing was an associate deputy of the country. one of the most recognized names along british investors with a bit of and i for identifying -- with a bit of a nine for identifying trends. gentlemen, thank you for joining us. you. let me to go with

what kind of language do you look for in a president to see the markets? jean: one of the risks i can think of about markets, the discussion would be key, i don't think we are seeing a lot of information around framework around trade. this is more transactional. i don't think this is a surprise. there's a lot to be expected in terms of trade information. a construct against -- a constructive discussion. francine: i don't think a trade war is more likely than it was six months ago. sometimes the president measures is language better in life. jim: i think that is true. he has been pretty muted. what he said is fairly reasonable. i wouldn't expect anything to come out of this week. i think the $250 billion have

been lined up. there's nothing really sensational coming out of it. i think it is going to be good for some asian currencies, particularly the yen. doesn't look like there's going to be a trade war. jean?ne: do you agree, jean: i agree there is no sign of the trade war. there was -- that was one concern we had. in this context, we are seeing a more constructive outlook on the region. francine: that me bring up a chart. looking at yen. i am doing it in real-time. this is a yen chart. we can bring it back to a year, five years. this is the one your chart for yen. the concern that we have for japan as they are nowhere near the inflation target. we don't know if kuroda gets in place, who will take over?

inflation isn of something i am looking at the moment. i think inflation is assiduous. -- is insidious. wage pressures building and the labor market being so tight. i wouldn't be too concerned about that. besides, i don't think it takes a rise in interest rates in japan for the yen to go up sharply. i think you will be a very small rise. francine: jean, when you look at the pboc, the governor keeps warning about leveraging. -- about deleveraging. why aren't the markets heating his concerns? -- heating his concerns. jean: the role that we are seeing, we think there's going to be some deceleration from the high-level we saw. stable overall. it is giving back up to allow for addressing some of the vulnerabilities. that is what governor joy is pushing.

they have been doing some tightening. i think it is pretty impressive. we have seen tightening. this question about where this could come, the headwind. we haven't seen this yet. we see there is a higher quality credit story in china which helps deleveraging. there is not a disconnect. the growth story is addressing some of the concern. francine: i keep on being told that instead, you can roll over it or adjusted. they keep an eye on outflows in the currency. is the next crisis likely to come from china? is that an easy target? jim: certainly the world suffers an unbearable burden of debt which has yet to be addressed. anyway reasonably that can be addressed is through inflation. i think inflation is coming.

this goldilocks economy is a very transient one. inhtening across the board almost every major jurisdiction is going to have its affect next year. growth is not going to be as great. francine: so you think they are tightening too soon it? jim: i don't think they are tightening too soon. but it is going to have the effect of tapering off, not just monetary policy, but also economic growth. i see economic growth being lower. thinkne: jean, do you monetary policy is coming? jean: we think the time for the next beacon is measured in years and quarters. there are legs to this expansion. we have seen -- we have not seen inflationary pressures impact just yet. there has been some surprise on the downside. inflation is missing in action

in some parts of the world. there might be a measurement issue but the bigger picture point is this means no big change in policy. their move is going to be very gradual. we are in a low rate environment for some time which has not much to do with central banks. very powerful forces at play. was conversion, just risk aversion. despite record highs, the markets are afraid of kill risk. -- of tail risk. francine: i looking forward to continuing the conversation. jim mellon and jean boivin, both with us. amex was a conversation with coming up next-- the conversation with carlos mussina. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's get straight to the bloomberg business flash nejra cehic. nejra: lehmans signal a slump in demand -- siemens signaled a slump in demand. as after weaker orders led to a sharper drop out of its power and gas division. profit at the power and gas division declined by 40% while orders for new agreement dropped. new bank has attracted consumer customers as it push to expand its consumer business. revenue continues to decline in the third quarter. adjusting for one-time affects, a cayman it to put 15 million --

it came in at $2.15 million. do two telecom has raised its full-year profit forecast. europe's largest phone character says adjusted even the -- ever the -- in a deal that would attract the u.s. wireless market. burberry shares plunged and the new ceo disappointed investors. that is the trenchcoat maker says it will add accessories and revamp its marketing while investing in store refurbishment . the company expects 15 million pounds of restructuring charges in 2019. citigroup ceo says the u.s. bank will not charge clients for fixed income research as new rules coming to affect. michael corbat was speaking exclusively to david west and. .- david west and

>> we are in the stages of talking to our clients in regard to what they want. the things they expect us to deliver and we will come to a price and expect that. on the fixed income side, there hasn't been that same type of metric in place. my guess is we will continue as we have to provide fixed income research for our clients. nejra: that is the bloomberg business flash. francine: brexit talks resume in brussels today and reports that the european union have given the u.k. and informal deadline of two to three weeks to say how much it is prepared to pay. the reports increase the pressure on u.k. prime minister theresa may. she lost her second cabinet member in a week. priti patel declined -- resigned. how is the chaos in the u.k.

government and uncertainty around brexit talks affecting markets? boivin and jim mellon are still with us. jim, we look at everything, what do you look at? is the noise coming from brussels echo is it the leaks? -- from brussels? is it the leaks? jim: our own government is a mess. him a plate towards achieving a dip -- it may play towards achieving a deal. the conservatives don't want an election. there is a chance that jeremy corbyn could get in which is a disaster. a lot of people -- there is a 90% chance of a deal coming before the end of this year. the outline of the deal, so i am not the slightest bit worried.

i think immigration should remain relatively open. the issue of sovereignty is one that i never thought was important. francine: what is the probability of the u.k. crashing out? 10% crashing out? and no brexit? ? jim: no brexit is very unlikely. say there's a nine out of 10 chance before the end of this year, there will be an outline deal because companies are in certain it finance companies, in particular, a very uncertain. .here has been evidence of that so far, the kid economy continues to confirm the pundits debts the u.k. economy continues to confirm the pundits. every time i look the figures, they have been revised upwards, not downwards.

the pundits have been wrong and they will continue to be wrong. we will have a deal but you can assets are relatively in the context attractive. assets and where seem to be overpriced at the moment. francine: how does that translate into market sharing? if you believe you will have a deal, that means there will not be a huge fallout. jean: clarity is most important aspect for the markets. what is going to be driving markets. if we do get clarity, it is going to be very significant. i tend to see it more sequentially. provides a status quo -- provide status quo a fallback for the next three years. that is a key driver. start thinking about adjusting its policies. that is what is driving the markets. a story, the clarity. on the back of that, we are

seeing signs of that affecting consumers and the initial reaction was pretty surprising on the upside. no big effect on now we are starting to see a bit of the impact. the place on the market -- that plays on the market. francine: what happens to the pound? jim: in terms of the bond, -- we have seen the reaction post decision last week and despite the first high continues, dovish in that context. the broader direction is toward policy normalization. it is consistent with the general treasury. francine: what happens, jim, to sterling? sure that the government wants a deal for financial markets? jim: i would've thought so. it is an important part of the british economy.

it is the golden goose thank you to ring else going. keepsden goose that everything else going. the trade deficit is still persisted. the row, about $.85. i think there is about slight upside to the british pound. francine: i don't know what you call the kind of the light of the new the tunnel. if there is a number on the divorce bill from the u.k., the first indication that we do get a deal. jean: i think it is one of the key indications, one of the key drivers. how we manage will be significant. francine: jim? , it it will be spun out will be less than that because it will take time to pay. the real figure will be about 50 was a very large british

economy. it is certainly worth paying. it is harmonious that is effective. francine: in the u.s., republicans on the house ways and means committee released the tax proposal today. a senate such person says it will be more of a consensual outline. the treasury secretary spoke to bloomberg. mr. mnuchin: this is the president's most important to messick agenda item. we are going to get this past. the objective is to get it to the president desk in december to sign. francine: tax reform crucial to the trump team. how much is it worth? there were rumors this could be delayed by a year. does it hurt spirits? -- they fadedut away.

b and have seen the ebbb a flow in the u.s.. we tend to think that if there is a significant decision being made, they can be more despicable positive for the markets. details ofstion, the that package and whether this is more of a progrowth kind of package or more stimulating on the demand side. the deadline you see seems to be constructive on the investment picture and capex with the corporate tax cut. that could be some of the things you can see buying more time in the cycle in giving more room to grow in the u.s. and i could be very constructive. it would be more of a sugar high tech story. that is the big question we will be grappling with. francine: you have fomc members

coming down. bill dudley from the fed saying -- announcing his resignation on monday. are you worried there is no communication you go is that the biggest risk? --indication? is that the biggest risk? jean: we have a history. in the first phase of this news fed -- new fed administration, there's a story that is there. we have to plan around the balance sheet that has been laid out. the big primers are in place. at the end of the day, the fed matters but they kind of gradual normalization story is largely not even up to the fed to decide. that picture i will think is

likely to change. francine: jim, do you worry about monetary policy overall? jim: i think the fed is fine. monetary policy is ok and it is good that there normalizing. i'm worried about the fiscal policy. gdp in the public sector will rise to over 120% very quickly which gets it up to italian levels. francine: but they have the dollar. jim: they do have the dollar. they are going to have inflation as well. aggressive tax reform, it is not going to mean interest of years economy. they are being a bit aggressive. francine: will it have to come as a package? jim: everything is a negotiation in the u.s. i heard you sing it might be delayed for year. that is the case. in terms of yours markets, they

are already priced expensive. there are very few volleys of pocket. -- fair if you -- there are very few pockets of value there. the downside may come from other factors. we don't know what those are. francine: what does this mean for bonds? treasuries? jean: the big story for the bonsai, there is a interesting disconnect. at the same time, you have this low rate environment which is very persistent. it has to do with structural fortis that won't change very quickly. it gives you a very lens -- gives you a different lens. in this context, bond prices are still very important for safety. this is a force that is going to keep rates low. the directions higher. we are going to get maybe a bit

more of a higher pressure coming from the dissident side in the u.s. this is in a world where everything is contained in terms of ability for rates to go up. francine: thank you so much, jim mellon and jean boivin. up next, exclusive conversation with carlos messina. he is working on a plan that he will deliver in january. will be asking him about dividends and ecb. the interplay between italian banks in the addendum's that the ecb wants to put in dealing with nonperforming loans. this is bloomberg. ♪

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♪ francine: you are watching bloomberg surveillance. i am francine lacqua in london. let's get to the first word news. >> donald trump says china is

taking advantage of american workers and companies with unfair trade practices and brand that's blamed his predecessors in the white house rather than china for the trade deficit. speaking alongside xi jinping, donald trump said in contrast to what he said was a very good chemistry between the leaders as they announced $215 billion in deals. who can blame a country for taking advantage of another country for the benefit of its citizens? i give china great credit. in actuality, i do blame past administrations for allowing this out-of-control trade deficit to take place and to grow. >> in the u.s., republicans on the house ways and means committee aim to release their tax proposal later today. markll be a conceptual instead of detailed legislative and speaking exclusively to

bloomberg, steven mnuchin stressed how crucial getting tax reform through is to the white house. >> this is the president's most important domestic agenda item and we will get it passed. >> when? >> the objective is to get it to the president in december to sign. lawsuits second -- has lost its second -- he failed to tell theresa may that she held a series of meetings with israeli officials during a holiday in august. it was revealed she suggested giving british aid money to an israeli army project. citigroup ceo says his back is basing -- bracing for a harder brexit. aheadke to david westin of the latest round of negotiations between the eu and u.k. >> in terms of brexit, we are watching it closely and from our perspective the prudent thing we

have to do is assume what has been termed as the hard exit. meaning there is no transition and no sharing arrangements that are put in place. because we have to be open for business on the day for our customers and make sure we can facilitate the things they need to do. that is the way we approach it. >> global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. i am nejra cehic. this is bloomberg. francine: despite --intesa sanpaolo with a higher third quarter profit but there are still issues with the two debt loaded nation banks the ecb labeled a lost cause. carlo messina is the ceo of intesa sanpaolo and is working on a new business plan to be announced early next year and joins us on set. for givingery much

us your time to bloomberg surveillance. how is it going, the two integration of the banks, are you happy with the general direction? >> we are very happy with the integration of the two banks. management -- we are going in the right direction. we are on track on cost reduction. we think these banks can be a positive surprise. with positive contribution to our results. i think we are in good shape, considering the integration of the two banks and we will accelerate the integration at the beginning of december. we will start with the value proposition. francine: what are you focusing on when it comes to the new plan? a concrete plan to improve asset quality and profitability? >> by definition, we will invest in work management.

this will be a clear point. today, generating more than 50% of results coming from work management. we will increase the contribution from wealth management and the cost side, we -- to reducen branches and integrate legal entities. we will have significant upside on a cost base. we will accelerate reduction on nonperforming loans. we will go to our target in 2018, 2020, in terms of reduction on nonperforming loans. my expectation is that we can be in a position to significantly increase net income. francine: you have excess capital, how will you use that? >> it is always a good problem. today, we have 12 billion euros. the point of excess capital is that you need to have a buffer

being in italy. in comparison with other peers. the perception of the country. 4 billion euros, 5 billion euros in excess compared to our peers and we have a significant amount we can use in the next business plan to maintain significant dividend payment to our shareholders. and to have possible increases in asset quality management that we can have during the business plan. francine: you have 7 billion to spend either on dividends -- >> you can use to be sure you can pay significant dividends to your shareholders. we will move into a pay outrage -- pay out range. euros forget, 10 billion

paid in the last four years. it was considered mission impossible but we delivered. francine: that is why somebody said you are the one he likes the most because you have delivered everything you committed to. >> that is why we are working on to present the plan we can deliver. machine that can deliver results. and wealth management, reduction of nonperforming loans, net income, strong capital, paying dividends. francine: if there is an acquisition, for example, wealth management, or anything else, can you guarantee your dividend policy does not change? >> we are not considering to have acquisition during the next business plan because after the acquisition of the two banks, we are close to one trillion euros of italian wealth.

one trillion euros is the gdp of spain or twice the gdp of switzerland. it is big money we can manage in order to increase the value of net income generation for the company. francine: let's talk about bad loan rules. a lot of eu lawmakers have been pushing back against the ecb plan. what do you make about this rivalry? >> the point of the addendum's, the saga of the addendum in the ecb. there is a clear point that it is a special point, the pressure from ecb will increase to have reduction in nonperforming loans. point of view, there is a fighting between parliament and the ecb in terms of what you can do from a legal point of view. parliament can

demonstrate there is something ecb has to change in order to become compliant with the legal framework. sector, it isng clear the pressure will be there and not on stock. from my side, what i decided to do is accelerate the reduction on nonperforming loans. we have a private equity fund int is delivering rates excess of all other private equity funds in italy. we continue to accelerate and we will increase our target of reduction on nonperforming loans in the new business plan. francine: does the addendum impact the future of the banks in europe? >> it is clear, if you want to have banking, you have to be -- a compromise between the different countries in europe.

one is germany. if you are in a position with germany, you want to have nonperforming loans and public debt in italy that can be solved. from the enjoyment point of view -- german point of view. the other side, underestimating levellian banks, you have two or level three assets not seen as a priority that are a priority. if you want to create a framework of analysis of different point of strength and weaknesses, you can only look at the point of weakness of the banking system like italy that has nonperforming loans. in france and germany, level two or level three assets. nonperforming loans with real estate collateral, legislation can allow you to repossess it -- nonperforming loans.

the final point should be the banking union. francine: why is it that international investors should look at italian banks, specifically your month -- back, five months before the election? >> that is a good point. [laughter] in this meeting with investors, the perception is, especially from usa investors, they are looking at italy as a good opportunity. there is an option for growth. real economy is engrossing -- increasing and gdp is growing. companies are delivering good results. all the fundamentals are going the right way. from a political point of view, do not forget that italian arele are 11% unemployment in very good shape looking at

wealth. they want stability. my expectation is with the election and the new -- they will find politicians will find a compromise, giving stability to our country in the future. i am not worried in my expectation is international investors want to invest in good banks or companies in italy. francine: thank you very much for your time, carlo messina. up next, howard marks cautions of stock market divergence. we hear his concerns. at about the next risks in the markets. this is bloomberg. ♪

♪ francine: this is bloomberg surveillance. i am francine lacqua in london. nejra cehic has been following the action in the markets. nejra: after a volatile session in asia, traded struggling to find direction in european equities, unchanged on the stoxx 600 and a mixed picture across the industry groups, financials leading the gains and consumer discretionary leading the losses. , the picture on the headline level is unchanged. where will the dollar go from here? , not a lot ofm data coming up this week means that sometimes trade is focusing on the technical tea leaves. , a momentum gauge showing the dollar is an oversold territory for the first time since 2014. also, against the euro, euro-dollar 1.16 on the nose.

suggestingn the euro further dollar strength and perhaps we could drop towards the 1.14 handle. the flattening yield curve is what is consuming investors. where is it going and what is it telling us? a 30 year treasury debt auction later today. if it drops below the 200 day moving average, about that level, they say it could go to 2.25%. to furthernting declines in the 30 year treasury yields and yesterday we saw the 10 day moving average to low -- drop below the 30 day moving average at when that happens the 30 year yield moves lower. 2.70% is where we are now and will we see further cuts? francine: the split between bond marking pricing and for economic growth versus the stock market could be a cause for concern according to howard marks.

us, heg exclusively to said market reaction to donald trump's election says you cannot tell what they may do. >> there has not been a down month since the president was elected. the only sure thing -- thing we were sure up before the election, that if he won, the market was tight and it reinforces my belief that we do not know what the future holds. we do not know how the market will react. i think there was great enthusiasm among market participants that he would fix corporate taxes, tax reform, infrastructure, deregulation, and that was the if it is for the markets move. he was expected to be a pro business president and almost none of that has happened. still, the market is moving positively. it indicates it is less likely to happen them thought to be. >> as the prospect of it, people

say at least he has reinvigorated the animal spirits we see in business and investment, when you talk about deregulation, tax reform, infrastructure. or when you look at the yield curve that continues to flatten, do you think otherwise? >> the expectation he will be pro business is legitimate, not clear how much he will be able to get done. he will be pro business. that is one of the elements. in our business, everybody focuses on one element at a time. there is a lot of things happening. president trump is one of them. the market has behaved very positively. the economic outlook is positive. the president's pro business aspect is positive. on the other hand, things are very expensive. prospective returns are roughly the lowest they have ever been. assets are offering the lowest

returns they ever have, how much should they go up? in order -- we are in a low return world, in order to get a high return in a low return world, people engage in progress behavior. that risky behavior makes the market risky for us. that should temper our enthusiasm. >> have we reached the point of what is healthy exuberance versus rational? >> i do not think the exuberance -- i do not think the behavior is irrational. it is a rational response to risk rates of zero. rationally, people move out the risk curve to get a positive return. that is what happened. it does involve an increase in risk. it has taken place and that has implications for all of us. >> looking at the yield curve, two and three at 114, 115 basis

points, looking ahead three years, four years in the future, is this something you will say -- this may have been a missed opportunity for us? >> i think the narrow spread between short-term and long-term is saying that the participants -- they do not put up a sign saying this is what we think -- but it implies they think economic growth will be lackluster and inflation will be mild. the answer to question is -- whether the market is acting as if economic growth is acting as if the economic growth will be lackluster. if the bond market is right that it will be and the stock market is ignoring it, that is one more factor, in my opinion, calling for some caution at this juncture. francine: those are the concerns of howard marks, cochairman of oaktree capital group. it is the next crisis?

.oining us is jim mellon economics andf market research at black rock, former deputy governor of the bank of canada, jean boivin. where d.c. opportunities in these kind of markets -- do you see opportunities in these kind of markets? >> i will be putting out a report on this issue of the appearance this connect between the bond market and equity market. -- i wouldhing is push back against the idea there is a disconnect where you see exuberance in the equity market not in the bond market. i do not think this is a foregone conclusion. we are seeing a pretty cautious overall stance of investors, reflected in the fixed income,

long-term rates that are low. there is a risk of urgency in the crisis still with us and lingering. investors are cautious. we haveanation for why seen big event risks like brexit, the donald trump election with minimal impact and temporary impact on markets. the reason being, in the lead up to that, there is a cautious stance from investors. when you say everything is expensive, we need to -- it is true that relative to history, -- we are in a regime that is different where rates in the bond market is telling us will have -- below for a significant amount of time which is a key factor in looking at valuations. we tend to think -- rates will go up from where they are now and the results and the fixed income world. the equity -- we tend to favor equity in this environment. where we think growth will be sustained.

i am a grizzled old participant and we live in a different world. always, the old trees come back to root. when things are extremely expensive and appeared to be very expensive, they are very expensive and the best rate is on the short side, generally speaking, to be out on the market come in cash. -- on the market, in cash. -- out of the market come in cash. -- out of the market, in cash. i would be on the short side. jean does not do. i do not think investors are cautious. the greed index is at an all-time record and cash levels are low, companies doing buybacks to sustain earnings and none of it points to caution. francine: are you expecting a

huge correction and is it across the board, and what is the trigger? >> no one knows the trigger, he said the bond market is expecting a subdued economic climate and subdued inflation for some time to come. i think inflation will be higher than people expected and growth less than people expected. i can't -- those both constitute a form of shock to the market. i do not believe a huge correction will be the case. in the case of the enormous rises in the last few years, not such a big deal. i do not think there is big upside, i think there is a big downside in some of the stocks, especially tech stocks that are far too expensive and far too concentrated. always, there are opportunities. i like the tech sector and keen on the longevity sector which has great upside. francine: if any of this came to

roost, what would be a haven asset you would look into? gold, the dollar the excellent haven? >> there are risks, we have talked about china, we do not think it is a near-term risk. something that could change eventually and you could see headwinds to global growth on the back of this. of atarting point is one durable growth. we can talk about whether we will be in a 3%, 3.2%, 2.8% in the u.s. that in a stable environment. the headline stability is the single most important driver of how we think about the outlook. i think things are expensive. one thing that is useful to highlight, when you look at competition investors are eating for risk to get to riskier asset classes. if you look at the spread

between the return on capital versus rates, these spreads are higher than the have been, historically. environmentlow rate and everything is expensive but the competition is not low. we have -- if there were to be a risk to materialize, i think fixed income, u.s. treasury's would -- u.s. treasury's would still be a safe haven, part of the reason rates are so low, people put them in their work folio. that is the positioning we are seeing. francine: if something ugly were to happen, given a couple of possible causes, it is the next 12 months, 18 months, or is there a time frame? >> a major market correction within the next 12 months. gold is a raging by because of insidious inflation and i would

belong gold. i do not know about bitcoin. francine: i need you back on to talk about it. >> friends of mine are still in gold and bitcoin. they have been right and i have been wrong. -- gold is a buy. continue, tom keene joins me in new york and we will talk about -- this is bloomberg. ♪

♪ francine: billions from beijing, the u.s. and china allows a quarter trillion dollars of

nonbinding deals. hardball, brexit talks resume with brussels, will it meet a hardened eu? howard marks points out the divergence between bond markets and economic growth, should investors be concerned? this is bloomberg surveillance. i am francine lacqua in london and tom keene is in new york. we are talking banks. and to chinarberry and president trump. taking theent trump headlines as he goes after past president of the united states of america. it was a remarkable speech by the president. in the u.s. and on the other side of the world but we will dive into it with good report from beijing. francine: we certainly will. we had pretty good news and terms of gdp. i am trying to put it up year.

this is euro area gdp forecasts rising for 2017. tom: crisis over. francine: you can turn the page and look elsewhere. let's get to the first word news with taylor riggs. >> president trump says the u.s. trade deficit with china is out of control and put the blame on his predecessors, not china. he spoke in beijing alongside the chinese president xi jinping and said china is taking advantage of american workers and companies with unfair trade practices. xi jinping is committed to opening up chinese economy and eight announce a quarter trillion dollar trade deal, many of them still tentative. going 11 of the deals in order to buy 300 airplanes you that $37 billion, the buyer is china aviation supply and the government has previously place large orders through a centralized buyer and dividing them among chinese airlines. it is not clear how much of the deal is new orders.

some of the wealthiest people in saudi arabia are trying to protect their fortunes from an asset freeze. according to people familiar with the matter, they want to move assets from saudi arabia and other gulf states in the midst of the anticorruption drive and the saudi arabians has arrested thousands of princes, former officials, and business leaders and frozen their bank accounts. brexit talks resumed today in brussels. there is no sign a breakthrough is near and both sides hoping for an agreement by the end of the year. european union envoys are sounding cautious, the u.k. wants the deal quickly so it can move on to negotiations on trade. global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine, tom? tom: not a record high in the dow yesterday, seems a daily occurrence but not yesterday. s&p 500 in the vicinity of 2600.

the curve flattening, that is an extraordinary curve flattening from 70 to 65.98. next screen. we look at the vix 9.83. i put up two yen currency charts. the three-month, 30 year spread, the entire yield curve. i will show a chart in a second. francine: european stocks are pretty much struggling for traction. moving sideways. we had a volatile session in the asian markets with the dollar steady. challenged china over what he called unfair trade practices. talking about burberry. two weeks ago, last week, the chief greed of officer said he

would step down in 2018 and they are plunging over concerns that the new ceo is trying to move up markets and it has implications in the trading session. tom: the changing in the garden of -- of the guard. this is the entire yield curve. this is the difference in yield between the 30 year bond and the three-month t-bill. it is not used to much. some people love to look at this . here is the 2007 crisis with a massive steepening of the yield curve as a short-term paper came down, even as a long-term paper state up. we rolled over and you see the velocity of a flatter, overall yield curve, nowhere near the recession numbers. it gets your attention, francine. francine: it does, a great

chart, especially important after comments from howard marks. china -- donald trump says china is taking advantage of american workers as companies with unfair trade practices. speaking alongside xi jinping, the u.s. president blamed his predecessors rather than china for america's trade deficits. president trump: who can blame a country for taking advantage of another country for the benefit of its citizens? i give china great credit. in actuality, i do blame past administrations for allowing this out-of-control trade deficit to take place and to grow. francine: president trump's words in contrast to what he said was good chemistry between the leaders as they announced $350 billion in investment deals. let's get to the latest with tom mackenzie. i am confused, he says it is unfair trade by blames past u.s.

leaders, is it a friendly president trump or a tough president trump? >> that is a good question. the personal relationship he wants to maintain with xi jinping, and he talks in glowing terms earlier about the chemistry between he and xi jinping, saying he felt warm for the chinese president but he does not want to drop he has been talking to his chinese counterparts about how they can address the issue. he is blaming past administrations and saying china should be given credit for the way they have taken advantage of the u.s. we got big number deals. when we break it down, we have not added it all up. maybe we'll get more details. boeing with a $37 billion deal for airplanes, and in a big

energy company involved in a deal worth about $43 billion, potentially in alaska building pipelines. beyond the personal relationship, what is a shift in the access of the trade relationships on north korea. not much so far. francine: when you look at the market action yesterday, anything else the president can achieve for america, and does it seem president xi jinping is getting what he wants? there are those china watchers who say president trump has been played. wooed by thes been pop and circumstance and given big dollar deals to sign off on. much as thet been overall trade relationship, particularly market assets which

is a key for u.s. companies, joint ventures in auto industries or financial services or moves in technology over to china. we have not seen anything concrete on that and the chinese have talked about it. they framed it in part of their own timeframe. north korea, the chinese said they will implement sanctions but nothing new on north korea. a comes away with deals and new personal relationship with xi jinping, but nothing that will move the relationship forward substantially as yet. we have a state banquet taking place. it is outside the forbidden city in central beijing. tom: i was floored by the speech, it was as if professor navarro, secretary of commerce wilbur ross wrote the speech for the president. if we assume a zero sum donald trump trade policy and assume trump mercantilism, how will beijing react to that?

course.ng will stay the from all the analysts we spoke to, they set up their agenda during the party congress and got their timeframe. yes, they have talked about opening up the economy and the president xi jinping talked about that and started talking about a more orderly playing field for u.s. firms operating here, something executives will be skeptical about until they see concrete action on the ground. it is unlikely china will shift their agenda away from their own timeframe. they are focused on these issues and will open up the markets but at a steady pace and only within the constraints they have outlined for themselves. francine: thank you very much, tom mackenzie in china. joining us is peter schaffrik the global macro strategist at rbc europe. when you look at china and what president trump is trying to do, how much of it is to stay away from what is happening back home? is it significant for moving the

trade wars? >> there are two levels we should look at, obviously there is the trade deficit issue. the way they have been talking about it is witt also its of sanctions and restrictions of trade. what is happening seems to be bilateral deals with a promise of bilateral deals -- the way it is feasible seems to be on the political level where political actors decide the contracts. we see the chinese story, a story in the press in germany, the military is looking at buying u.s. aircraft. take a step back, when we look at the bigger picture, the vast majority of the trade deficit comes from the private sector and a good part of that cannot be directed. i am not hopeful that these actions currently pursuing can change the overall and not shortly.

tom: there is a wonderful study of mercantilism of london that is very different than in america. overlaplism, doesn't and affect other nations but -- or is it discrete to the united states? >> the overall picture is not entirely unique to the united states. how they seem to go about it or how they want to go about it seems currently a bit unique. the ability to push and pressure political actors into doing a deal with them because they are the u.s. and very big. when you look at the private sector and what they are doing, you have to change regulation and laws to do that. that is talked about in other places. in the u.k., talking about opening up to the world. whether or not it will happen is a different story. it is unique to the u.s. in some ways. tom: we will continue with peter

schaffrik of rbc europe this morning. here are images of people we have been talking about. we just lost the shot but it was of the secretary of state and secretary of commerce in beijing as they attend with the president. coming up, a conversation with the gentleman that sounded so much of the dynamics of our job economy with inflation and with economic growth. from columbia, edmund phelps in the 9:00 hour. from london, new york, and china, this is bloomberg. ♪

♪ >> this is bloomberg surveillance. let's get to the bloomberg business flash. investors showing the

disappointment in burberry with shares in the fashion house plunging after the new ceo gave sketchy details of a plan to move the brand upmarket. morgan stanley says they plan to cover his earnings by 15% per year and fiscal 2019 and 2020. the battle over at&t's proposed takeover of time warner is escalating. at&t ceo says he will not sell cnn as a condition of getting the deal approved by antitrust regulators. according to people for mayor with the matter, regulators and the companies have discussed the vesting assets, including the news network. justice department mehsud to block the deal. the investment firm backed by the often belichick -- billionaire is expanding the food empire in the u.s., they have agreed to buy a bakery chain but terms were not bisclosed which gives ja cap-united states and more

overseas. tom: thank you. theael mckee yesterday with secretary of treasury and will speak today, steven mnuchin in new york at the economic club of new york. that will be hugely attended by bankers, financiers, people affected by tax reform. here is the secretary on corporate tax. thatr strong preference is the corporate tax rate starts next year. the longer we wait, the worse it is for the economy and making companies competitive. we look forward to working with the senate as the details come out. tom: steven mnuchin to michael mckee yesterday. hertling. is james and peter schaffrik is with us from rbc europe. too many things to talk about but i want to touch in china an advance forward the conversation

which overlaps with u.s. tax reform. that is the stunning speech by the president, reaffirming his zero-sum economics. how does that affect u.s. relations with europe? >> the relations with europe are already fairly sketchy because many leaders in europe do not have a sense for where the president's head is. and what his attitude will be towards the situation, especially with brexit. tom: let's go to the president and first lady who are in beijing. attend intry as they believe their third state dinner in three or four days. they had baby back ribs in korea. not sure the menu. any idea what the cuisine is tonight? francine: i have not spoken to the personal chef. talking about trade, instead of

chefs. tom: let's consider with mr. hurling who does -- who does chinese takeout like nobody's business. from where you sit and with what you read, will tax reform be amended or changed because of what we saw this tuesday? >> senator hatch made comments that suggested it might be changed. regardless of what they do, they are in a tough spot, politically. because the tax reform methods currently presented, they will have to make a choice between what the snarky blogs call the donor class companies and the wealthy financiers who write the checks. and of their constituents. tax reform is weighted towards corporate tax cuts and a large number of individuals, a significant minority of individuals will have tax increases. it will be a difficult

tightrope. francine: peter, there is not an addendum to bring backpacks money to balance -- back tax money to alice the books. -- balance the books. andne of the key components unknowns of the proposal is how will it be funded? are we getting tax reform or a tax cut? if it is a tax cut, how big and how big will the fiscal stimulus be? the estimates range between $1 trillion and $2 trillion of how much money over the next 10 years will be going into the economy, that is a fiscal stimulus. that should be seen as boosting gdp. how much is unclear. that should be a boost. if we take that, that is the key thing for markets, that should have an impact on longer-term yields. so far, not happening.

willpeter schaffrik continue with us. important scheduling point, on heroine, opioids, and republican politics, rob portman, look for that in the 8:00 a.m. our in new york and 1:00 p.m. in london. this will be a timely interview on opioids. this is bloomberg. ♪

♪ francine: this is bloomberg surveillance. i am francine lacqua in london

and tom keene is in new york. it emerges between bond market pricing in lackluster economic growth between the stock market could be a cause for concern according to howard marks, the cochairman of oaktree capital. bloomberg and said some caution is needed. >> the interesting question is whether the market is acting as if economic growth -- is acting as if the economic growth will be lackluster? if the bond market is right and it will be and the stock market is ignoring it, that is one more factor, in my opinion, calling for caution at this juncture. francine: that was howard marks. let's get back to peter schaffrik of rbc europe. to be cautious or not be cautious? >> i disagree with the underlying assumptions to start with. he called growth lackluster but growth is not rampant, not

lackluster either. in the u.s. and in europe, growing at around 2% plus, not too bad. on top of that, in previous expansions you had a big increase in leverage, an increase in debt to gdp and the public and private sector and in the private sector, we are not seeing that. it is a bit more stable than it used to be. if you look at where the bond market is pricing and where the equity market is pricing, the bond market is currently pricing is, despite the decent growth, we do not get inflation and the breakevens are low and bought is low and the bank of candidate can follow through with promises -- mike of canada can follow through with promise. you have to recognize where growth is coming from, from productivity and that has been declining. in the past, it has come from

real leveraging and taking on more debt. this is not what we wanted because it led us into a big collapse. we wanted something more stable, that is what we got. i think we have a different kind of growth. francine: we have a different kind of growth. peter schaffrik, rbc europe, global macro strategist and read more bloomberg stories by picking up the latest edition of bloomberg businessweek. has he gone too far this time? this is bloomberg. ♪

people.reat hall of the echoes back to richard nixon and

henry kissinger. 1970.eve it was -- always a moment of history. the president's at erskine and criticism of previous administrations, really taking the headlines as well. many from his cabinet including the secretary of state and secretary of commerce. here's taylor riggs. taylor: sticking with beijing, president trump is accusing china of predatory trade practices. he tried to shift the blame away from president xi jinping. u.s. trade deficit with china is the fault of prior u.s. and ministrations. china is willing to increase imports of energy and agricultural products. many trade deals are still tentative. in the u.s. on capitol hill,

senate republicans will release their tax plan today that it will only be a concept. not beual bill will written until the senate finance committee finishes debating proposals. the senate plan would keep a number of individual tax brackets at seven. .he house plan only has four the european union has reached a deal to overhaul the largest cap and trade and omissions market. the markets more ambitious climate goals in the next decade. federal investigators have subpoenaed carl icahn over his policy to change biofuel while he was an adviser to president trump. icon was given the job of helping shape the president's regulatory agendas. he was criticized for pushing a change to the renewable fuel program that would have benefited one of his investments. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs.

this is bloomberg. francine: thank you so much. brings it talks amid -- brexit .alks international development -- peter resigned over schaffrik, thanks for sticking around. mma, looking to the program. is it true that we need to talk about the divorce bill? emma: the pressure is on to come up with an offer on the divorce bill. ali robbins, theresa may's main brexit advisor has been in brussels this week holding meetings. having talks before the talks if you like. the key issue is the divorce bill. they need to make progress on

citizens rights. david davis did make clear there could be concessions. he said the exit bill would be to the eu's favor. he seemed to be per pairing the ground for unpleasant news. we have not heard any indication that he has -- francine: how week is theresa now?ight if your europe looking at scandals, sexual allegations and then you have talk of prateek patel having to resign, doesn't mean that they take the prime minister less seriously? emma: a meeting yesterday of the eu in brussels and one of the scenes at the meeting was that they were worried about fiscal risk, lori at about the u.k. government. there is no government in germany. the u.k. position -- the

fallback position has been germany will help us out. merkel only encouraged that view in october if you remember. people will say that is not realistic. it is less realistic when merkel says she does not have a government and coalition talks are going on. tom: different news media have different timelines of when people will talk about different topics. i'm baffled. for our international audience, would you explain what incentive brussels or germany or france or bratislava, what incentive do they have to advance any discussion with the chaos known as the united kingdom? emma: i suppose you could argue that neither side of this want a disorderly brexit. the risk to the u.k. is bigger than it is to the eu.

across the european union want there to be a deal. eu companies can continue to export to the u.k.. re should be a final trading arrangement. if the u.k. tumbles out in march 2019 without a deal, there will be no payment into the eu budget . one of the few concessions theresa may has made is that in return for the transition deal she wants she will pay into the eu budget for the two years just after the u.k. leaves. that would prevent a whole opening up in the eu budget. countries like poland are keen on that happening. tom: not that the spanish armada is going to show up, but do they need the money? does the you need the money from the united kingdom? emma: the eu plans its budget and seven-year cycles.

the current cycle posted 2020. when the u.k. leaves if they stop paying in, they leave a big black hole. francine: what are the odds that we don't get brexit? that we crash out? what are the signs that give you indications of those things? peter: those are three questions in one of course. i still think that the odds are extremely low when you look at betting odds. outside indications, that seems to be what the market is looking at. .e get a crashing out odds seemed to be low but rising. i would argue everything we just everyonee odds are comes happily together, gives everyone a hug and we have something more concrete. the does not look high at all. we possibly get a transition deal.

the market is firmly pricing it's going to take longer than currently is assumed. i think a good part of that is priced in. at the end of the day it's going to disadvantage the u.k. and i think that is what is currently priced. if that assumption changes i think the market will change. francine: how much of this is political infighting? corbin --count jeremy what does that do to your models? peter: there might be infighting . it seems very obvious there is. i'm not quite certain we get elections by the time this period is up. if you look at the bigger not a hugeere is incentive for the eu to advance these deals. they don't want the no deal option either but to advance that and reach out across the aisle big-time is not really in their incentive.

what we are currently seeing is the struggle of the u.k. trying ,o get something out of the eu achieving that does not look high to me. tom: we continue the pass and tree with, ross thomas -- with emma ross thomas. the president speaking in the great hall of the people in beijing. always an important moment. we will bring it to you as we can. emma ross thomas as we continue. officea cabinet should i be watching? .rancine up to all the dirt which cabinet officer do any to watch? emma: if we learned one thing in the last few weeks it's not to make predictions. the appointment of the new defense secretary was a surprise to everyone. i'm not going to have guesses i

don't think. francine: always watch boris. just good fun to watch. tom: for entertainment value we will watch mr. johnson. thomas, brilliant as always, we continue with peter schaffrik. you're in your car, you are stuck, nowhere to go, yes you do. moon.ing therapy with dr. morninge you a terrific news update. coast-to-coast and across canada.

francine: this is bloomberg surveillance. a burberry shares have plunged new ceoas 10% as the disappointed investors with a vague details of a plan to move the brand upmarket. it will add accessories and goods and revamp marketing while investing in refurbishment. tom sometimes is dressed head to toe in burberry. us. cantor joins still with -- still with peter schaffrik. the new ceo has not been in charge for very long. suddenly they put out this statement and it is taken wrongly. this there is too full to appointment. the cost of these refurbishment's and other

changes they're going to try to move the brand upscale. secondly, there's not that much detail on what they plan to do. a lot of what they are announcing is what christopher bailey had already kind of nudged them in that direction of moving upmarket limiting their exposure to u.s. department stores and stopping sales to make the brand more exclusive. does not a lot more than that they are announcing. francine: are they concerned that costs will go up? are they concerned there is no greater director? eric: it is all about. more capital expenditure, a hit in 2020.s over 2019 francine: how does burberry traction?is a need to appoint someone to take over christopher bailey asap? eric: they do. they've said that's not going to

happen right away. a lot of speculation over who it will be. they need somebody high profile because vista for bailey was high-profile. if the situation with him and gobbetti was not tenable over the short term. they will invest in handbags and stuff like that which is a smart long-term approach but in the short term it's going to be a rocky period. tom: i happen to walk by the , one opinion,ws they are garbage. this got nothing going. no soul. i don't care about upscale, midscale, is anything happening in burberry? eric: i won't put you on my christmas shopping list than. they have rolled out new handbags and stuff like that. do is theyng they of theved up in terms price range. handbags that are costing $3000

which is more what you would expect from a celine or somebody , which knows a thing or two about making handbags. tom: two trenchcoats matter anymore? eric: it does if it's raining. handbags make more money than trenchcoats. francine: i don't know if you're the key audience. tom: agreed. francine: christopher bailey is leaving. fine. when we went to the last show, there was g dragon. 100 million followers or something like that. kind of the edgy, kohler, younger crowd they're going for. whether the strategy works or not is to be seen. how important is the new market? eric: asia is doing pretty well. china is driving growth. the problem for burberry is the

u.s. and not have exclusive image in the u.s. in the past, burberry has been a utilitarian brand. a little bit of everything to everybody. it's a big company, not a focused brand. they have a different image in china from what they do in the u.s. and that is difficult to juggle. francine: eric pfanner. peter schaffrik stays with us. talk all things burberry with tom and i log onto tv go. tom is the right want to talk about this, not me. this is bloomberg. ♪

taylor: this is bloomberg surveillance. it's clear why rupert murdoch's 21st century fox wants to stay in the news and sports businesses. fox posted another quarter of double-digit growth in fees from cable and satellite providers driven by the popularity of fox news. news and sports were not on the table when fox discussed selling

assets to disney recently. square is showing it is more than payment services for small stores. the company posted earnings that beat estimates and raised its forecast. larger merchants are turning to italy,ways to -- in intel or has helped rescue two of the countries failing banks. told francine laqua investors don't have to worry about the banks dividends. will remain ate -- in thet dividend last four years. --e years ago we believe taylor:taylor: u.s. investors seek italy is a growth opportunity. that is your bloomberg business flash. we also did talk about

ecb, some of the things they want to do. calculating bad loans that would impact italian banks. we talked politics. we know mario draghi put in place something seen as tapering. let's get back to what this means for bonds and bond yields with peter schaffrik. was the ecb to dovish? timeline, anda end date, what does it mean in the confidence of what they are try to do? peter: i think they delivered exactly what they wanted to deliver. they had to taper for technical reasons. what they have delivered it is

something that prevented the markets from selling off big time. they were fearing some kind of attempt -- some type of temper tantrum situation. encouraged to rally and we see that coming down. periphery rally, the credit spreads rally. that is exactly what they wanted to do. they wanted to keep their policy as loose as possible despite the fact that they had to taper. francine: doesn't mean they are tapering because of technical reasons and there is no conviction? eric: i certainly think that is what is going to have peter: -- i certainly think that is what is going to happen. of course, the economy is in better shape. some members would argue for something more forceful. the bulk of the community, , pratt, theydraghi

prefer staying loose longer. tom: what did you make of the headlines francine had the other inflationistas, reaffirming concern that is out there? how do you filter that? peter: a common theme across all the major global central banks. if you look at the bank of canada, the us trillion -- the australian, they all look at a relatively strong economy and they say traditionally this has lead to inflation and this is what some of the hawks are arguing. the phillips curve argument. other say the economy is not happening, why should we take action now. if you look in the u.s., quite prominent people such as larry summers argued we should wait

until we see the white in the eye of inflation. in the ecb's case you have dominance of the people who are more in that camp. a brilliant chart earlier about the shape of the u.s. curve. if you plot the european curve, the european curve is steep in that context. the main reason for that, one of the few places across the globe where the short end of that her is firmly -- of the curve is firmly anchored. tom: there has to be a shock that changes this dialogue. what do you think is the outside influence that would change mr. draghi from that short term paper reality he's in right now? peter: we could always look at shocks. there are some risks out there on the upside and downside. a lot of people talk about the chinese economy have it might come down in terms of growth.

of course, there are others who say it is a question of time until we get significant wage growth. that is sort of the thing that would change the picture for the ecb as well. if that is true, all the central bank arguments about the phillips curve will be dedicated. -- will be vindicated. hard to predict them by definition. shocks,: the left field have you measure that? field we try to look far and see if we can see some of the elements. chinese leverage, the bank situation, is one of them. we measure on the positive side quite a lot of smaller indicators whether we see wage growth happening. one of the things we look at, the wage development a new leak created jobs in the u.s. because the data is quite good.

-- the newly created jobs in the u.s. because the data is quite good. tom: thank you so much. greatly appreciate it. we go back-and-forth to beijing. we'll do that in the next hour as well. peter schaffrik is with the royal bank of canada, the rbc. ye sterling and jens nordvig on the surprise of the week dollar over the summer. ♪

beijing, zero some tour commences.

at past u.s.ot presidents from obama to washington for an out-of-control american trade deficit. what we need is a strong dollar policy. on yellen, on draghi, yens nordic on the fall of the euro. toublicans recalibrate november 6, 2018. good morning, this is bluebird surveillance. -- this is bloomberg surveillance. we just the to death or bury. do your with big changes. something we need to keep an eye on. a lot of changes in fashion. quite a lot of adjustment to what the consumer wants such as u.s. and china. tom: we welcome all of you

worldwide this morning. .ere's taylor riggs taylor: he puts the blame on predecessors, not china. he president broken days -- said china is taking advantage of american workers and companies with unfair trade practices. she says he is committed to opening up china's economy. boeing won one of those deals in order to buy 300 airplanes valued at 300 -- the buyer is china aviation supply. the government has placed large orders through centralized buyer among chinese airlines and leasing companies. it's not clear how much of the deal is new orders. the wealthiest people in saudi arabia are trying to protect their fortunes from an asset freeze.

according to people familiar with the matter, they want to move assets from saudi arabia in the midst of the anticorruption drive. ofdi's have arrested dozens former officials and business leaders. brusselslks resume in -- global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. tom: let's look at curve flattening how about a data check equities, currencies commodities, 66.86 on curve flattening the come in with a vengeance from 72 basis points. difference in yield to the 10 year and the two yield move the decimal point over .67%,

rounding up, what a skill of mathematics. vixvic showing 9.93 -- the showing 9.93. a three month 30 year spread it extraordinary into a broad 156 basis points and i saw china action in currencies. francine: nothing like a bit of china action. treasury yields declining. -- a volatilee session in asia. quite a move after they decide to go up markets and lacking --ails tom:tom: we've shown images over the last few hours of the state dinner in beijing harkens back to 1972. the president of the united states and the first lady with

secretary tillis and secretary .oss can wills joins us from beijing. he is our bureau chief. extraordinary to me, the speech of the president on the cut right to the chase. it was zero sum. how will that speech be received by the business part of the chinese government? >> president trump was speaking right next to president xi talking about this trade deficit that was out of control. seemed like he was going to have a hammer blow to xi's government. he says i don't blame china, i blame the previous administrations in the u.s. he has given credit to presidentxi for taking advantage of this unfair rules and .enefiting the chinese people

it was interesting because president was nervous at first. when he placed blame on the government of the u.s., previous --ernments, presidenti president xi nodded his head with a smile. tom: let's listen to the president of the united states. unfairry one-sided and one, but i don't blame china. who can blame a country for being able to take advantage of another country for the benefit of its citizens? i give china great credit. i blame past administrations allowing this out-of-control trade deficit to take place and grow. tom: extraordinary. day shank iran with a

i shot came out on the floor of congress -- i -- the new relationship of china pre-nixon kissinger. is an extraordinary speech in american history. in my off the mark? >> it is extraordinary. vintage trump. something we knew we could not predict what he would say in advance. he did not fail to deliver. except for some of the one-off , there's $250 billion worth of deals here, trump and his team did not seem to come in prepared to deal with the fundamental roles of the underlying trade. some of the people we talked to in the business community said previous administrations consulted with him beforehand and this time the trump

administration came in without talking to get the details of what's going on. it is extraordinary on a number of counts. francine: what does president xi want from the u.s. >> they need less from the u.s. actually. they want status -- market status. they want access to a number of off landed technologies. reciprocal fair treatment in deals they go to the united states. those are the main things. i don't know how you measure success in these kinds of trips. whether dollars watch the come to the u.s. or whether you get a resolution or closer resolution toward north korea and what form with that take? >> if you look back at some of these deals, $250 billion, that

is a great headline number. it is what president trump wants to bring home for his home base. if you look under the hood on them deals, many of agreement in principle. deals have yet to be worked out. these are not finished deals. these could take a long time. some may never come to fruition. we mentioned the boeing deal of 300 planes and 30 $700 billion -- $37 billion. it is not clear how many of those are new orders. inre was an order back president xi went to mar-a-lago. it is unclear. tom: greatly appreciate it from our beijing bureau. bureau chief on the watch in the capital of china. thrilled to bring you jens

importantxceptionally book a few years ago, passionate book about euro and we will get to that in a moment. because of the day and the passenge -- the pageantry, we ho get to china. your observing the president's speech. and thethe president navarro ross axis of the administration, what did they get wrong out of rogoff international economics? what did they get wrong about trade dynamics as you hear the president speak? jens: it's almost like they're looking at trade as a company would look at how would deal with the rest of the world. economics is more complicated. it's not a zero-sum game necessarily. it's a i have a trade deficit that means we are being taken advantage of. you could view it as a consumption surplus. if you have a trade deficit,

more consumption than the other countries. tom: the u.s. has more consumption so that generates a trade deficit. jens: exactly. if you have a strong economy, very strong consumption, which is something people view as good, that would generate a trade deficit. tom: you and i had to read a 12 or 15 page paper called jacob viner 1948, a definitive modern essay on mercantilism and harkens back to the 17th century . is president trump trying to take america back to the 17th century? jens: a lot of the rhetoric sounds old-fashioned. when you look at what is going , therehe administration are different people who have a view on trade and i think one thing that is really important in the next couple of months is what specific view is going to win out. you mention ross.

some people said ross's hawkish on trade, but i don't pick he's as hawkish as some of the other guys in the administration. tom: such as who? jens: the u.s. trade representative. jens:i think trump himself is hawkish. if ross, wilbur ross, the trade secretary, was going to do the deal alone, i would be more comfortable than the path we are on now. francine: when you mean hawkishness does that mean they want a trade war? we've seen trump is willing to blow nafta up whether it is negotiating tactic or an end goal we don't really know. that is very radical approach to trade deals. i think what we've seen in the negotiations let's go -- they go on with nafta, the proposal the united states has come up with is borderline offensive. it's a very unusual tactic in

terms of having a consensus building between your neighbors. that's i mean by hawkish. francine: jens nordvig stays with us. up next we speak with -- we will be asking him about how you retain some of your clients but also nonperforming loans.

francine: this is bloomberg surveillance. tom and francine from london and new york. let's get on to germany. may --man lender said it

in the midst of ongoing turnaround plan the group is refocusing on its two core segments. let's go to frankfurt where matt miller is joined by the cfo. matt: i'm here with stephen engle's. you have been working on a turnaround plan. you are really ahead of schedule as far as building your customer thisand focusing on business strategy. on the other hand it seems revenue has been stagnant. is it because of this turnaround plan that topline growth is so flat? stephen: the simple answer is not so simple. what the new strategy is about is growth in assets which you can see already during the first year of our transformation. that will ultimately lead to higher revenues.

we are an environment still losing revenue especially on the and i i line. we are still running down business so topline for the group is still affected. if you take them out the growth -- yielded soar many additional assets. matt: you guided to the lower end of your previous revenue with more you specify clarity what were looking for at the end of the year? stephen: the previous guidance was that we would expect clean 8.6nues to be around billion. the performance of the first three quarters has shown we are approaching the 8.6 but probably from the lower end the main marketsiven the slow

and you have seen that elsewhere , a little bit less revenue than we would have expected so as much as we like the performance to operating segments it's amazing -- mainly the treasury performance which gives us a little bit behind original expectations. , it: with regards to profits think you said it's a valid assumption when someone suggested 100 million euros or around thereabouts this year. talk about the interest rate scenario, i don't really see that changing in 2018. stephan: 100 million is what i said, probably a valid assumption. that includes all the restructuring fees and other things we discussed in previous quarters. i think that needs to be part of our 2018 guidance around the annual press conference.

the interest rate environment will not go away but it's not the assumption. we are well geared toward rising interest rates but i would not expect them to move in 2018. interest rates will still move .nto the end i i line i think that is a manageable area by now. if we can grow the way we have grown this year i am optimistic. matt: investors are optimistic as well. commerzbank stock is one of the across theming continent. your stock is up quite a bit today as well. how much of that is due to you being ahead of your plan, ahead of schedule on your turnaround plan and how much is due to takeover speculation? that if i would hope not all at least the best of it , which wethe strategy

have seen over the first three or four quarters. the perspective and what we are doing seems to satisfy it and really convince the investors. i think that's the main driver. whether it is interest rate or any other discussion we are having is probably too difficult for me, you need to ask the investors. matt: some of your competitors have talked openly about the possibility of purchasing commerzbank. have you spoken with anyone from unicredit about this possibility? stephan: i don't think you expect me to comment on that speculation really. paper ase've already --h as you read about it

still a difficult environment. matt: the market likes your numbers today, of 3% the stock is currently trading. thanks for your time. tophan engels, declined break from real news but giving us the outlook for the banks performance this year and into next. francine: matt miller with the commerzbank chief financial officer, stephan engels. interesting to see the european banking ceo. -- you have stories on and off day of consolidation, even concerns with deutsche bank and some of the german banks. everyone's interest gets perked up. tom: let us turn to the news in you -- news in new york. yesterday michael mckee grilled

him. here he is, the secretary of treasury. >> i'm not concerned about that. there is very big support for middle income tax cuts which is a big part of the focus of the president in making our business tax system competitive with the rest of the world. tom: treasury secretary of the united states. michael mckee joins us now in new york. our economics editor in washington. two takes on the secretary treasury. does anybody on capitol hill nuchin?to mr. mu minute: secretary -- tom: i mean this with great respect, you grow the guy yesterday.

the guys got the hollywood mask. it's like he's an avatar or something. the mask came down. what did you clean? lot. you don't lean a he is on talking points. what you do clean out of an interview, the white house is not sure where tax reform is going because the senate has not come up with a plan. they will announce today in theory an outline. we had an outline of the house plan back in august. did not really get them anywhere and it changed a lot. they are still struggling to find the pieces and fit them together for this bill. that's one of the reasons the president left steve mnuchin and gary cohen back in the united states we went to asia, so they could oversee this process. francine: why is it so difficult? mike: they are running up

against the immutable law of mathematics. do au're going to try to tax bill that can only lose $1.5 trillion over 10 years, you got to make those numbers work. it's not fitting into the cap. congressional budget office came up with a number of $1.7 trillion for the house bill. they are over the number already . it's hard to make this work, especially since they are not working with democrats at all, trying to come up with a plan that satisfies only republicans. you see tension over state and local tax deduction in the united states. the house, very worried because republicans represent a lot of districts in new york, california, places that use this deduction, where as in the senate, the senators who represent new york and california are democrats. they are talking about repealing the whole thing. francine: in the corridors of washington, what is the horsetrading?

kevin: a lot of anticipation to see whether this thing gets done by the end of the year. there's other issues impacting washington as well. senator bob corker, who has sparred with the president, he's actually holding a shadow hearing next week on president trump's use of nuclear weapons. the president overseas in asia, in china, making the rounds as well. a lot of different things happening inside the beltway and around the world. tom: the washington post takes one of these itty bitty parts of tax reform, the tax on 70 large research universities, the usual victims we know. he tears it to shreds. does anybody care about these little stories? are they part of the discussion in the marble hallways that you frequent? kevin: in particular on taxing large endowments a lot of folks in the conservative party, we think that's a good idea -- they

think it's a good idea because these colleges of not been his forthcoming with their payments as the should be or their transparency, including in cases of u.s. taxpayer dollars. democrats on the left don't like that. they think both need to be defended at all costs. knocking the seat type of vetting we've seen in the past simply because as michael mckee said we don't even have a full plan from the senate. it is being done quickly. i've heard from some republicans that theysappointed have not forced the issue on various portions of the tax plan. tom: i'm going to have lunch at the sheraton times square. what we listen for? mike: looking for any kind of outlines of what they will or will not accept that the white house.

the president has to sign whatever it is. we are in the willie sutton phase. you want to cut taxes by as much as the republicans do you will have a big hole so you go where the money is. university endowments, they're trying to figure out where the money is that they can replace those. what does the white house think of their various proposals? tom: i want to get you back to talk about the president cost speech in beijing. his interview of mr. mnuchin, you can see that across digital properties. we will try to figure out what mr. draghi is doing and maybe we will look at the euro as well. bloomberg business week, just out on united states systems. ♪

tom: good morning everyone. bloomberg surveillance. i think we're back with our guest host, jens

nordvig, he is with you in new york. we are talking about brings it, one of the main things -- brexit , one of the main things we're looking out for. i don't know whether you are looking at fx calls, the success of brings it, whether it's through the currencies or the boe does next. tom: it's important to look at polarities. let's go to europe first. ring up a chart. stronger euro. deviations.ard does europe want stronger euro? a big risk was priced into the euro. we have the cure -- the qa people worry about. we have the french election that took us down another leg and then we had the dollar affect from trump coming in.

all of those things came together in the first quarter and they have been unwinding with micron winning the election -- with macron winning the election. tom: is it range bound or are you optimistic on the euro? jens: i've been constructive this year. 100 -- moved from 108 to 21.08 to 1.0 16 -- the 1.16. pretty forward guidance. they managed to squeeze the yield curve down further. putting a halt on this euro rally we had. dynamics in euro-dollar will be about what the dollar is doing. we can talk about that later but we are sitting in a tricky point where on the one hand we have more hawkish members of the fed appointed, on the other hand basis is not there yet. tom: let's go back and look at the dollar.

new york city to our first word news, taylor riggs. taylor: president trump is accusing china of predatory trade practices. in beijing he tries to shift the blame from xi jinping. the president says trade deficit with china is the fault of prior u.s. administrations. china is willing to increase imports of agricultural products. in the u.s. on capitol hill, senate republicans will release their tax plan today but it will only be a concept. the actual text of the bill will not be written until the senate finance committee finishes debating proposals. keep thee plan would number of individual tax brackets at seven. the house plan only has four. federal investigators have subpoenaed carl icahn over his efforts to change biofuel policy

while he was an advisor to president trump. ahn was given the job of helping shape the president's regulatory agendas. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. francine: breads it talks -- theresa may lost her second cabinet minister in a week. she helded meetings with israeli officials during holiday in august. -- there isook next movement on breads it talks and they're going the way the u.k. look wants them to or not. emma: we are probably not going to get huge breakthroughs. the next key event will be a summit in mid-december when eu

leaders come together and that is what everyone is aiming for there to be a breakthrough than. it depends on who you listen to. the irish prime minister yesterday saying yesterday in parliament he did expect there to be a breakthrough in december. the outline of what that trading relationship is going to look like. diplomats in brussels, they were very cautious, they were worried about the political instability in the u.k. and what that means for negotiations. countries including germany were saying don't start rafting documents on the trade relationship yet because we don't want to send the wrong message to the u.k. we don't want to send overly encouraging messages that things are moving on. they got to come up with a better offer. they have to come up with any knowledge meant of where their reliabilities line.

only then will there be a breakthrough. governments the may ready to give more in the divorce bill to start properly negotiations? emma: i'm not sure the may government is one thing. francine: fair. week, david davis came out and said that the exit bill would probably favor the eu . that sounded like preparing the ground for bad news. bit, will save the both of us. -- he'sead into that been on a tour of europe this week, he's been to rome, warsaw, no indication that he's put anything new on the table. francine: we are getting some headlines from the commissioner for breads it. for the moment, what we need is to have a level playing field

with the u.k.. agree on thet withdrawal of u.k. before trade talks. is tone shifting a little bit? emma: i suppose the tone shifted after the florence speech. saying, what are he's always said. u.k. agreed to this back in june. they might have been regarding this. we want some kind of guarantee that if we make a move that you will reciprocate. that is what it all comes down to. tom: we can do this with jens nordvig. a solid 10 years ago about how currencies compensate against a set of currencies. you and i use the word compensate maybe a little different than others in the

foreign exchange space. how will the united kingdom's theency compensate against dynamics of the dollar and dynamics of the euro? it's a complex mix. jens: what interesting about the u.k. is we have seen these big moves from sterling. the market around the currency is forward-looking. we are seeing through this transition period, worrying about what the end deal -- tom: is it sterling strength, sterling weakness against these non-brexit geographies, america and the european continent? jens: the currency market is pricing some probability of a hard brexit of some form. what's interesting about it is bank of england is looking at this currency and it's already week and fitting into inflation now. at the same time they look at the consumers who are not quite as forward-looking, still kind of spending. becauseomy is doing ok

they're are not so forward-looking. currency is weak because very forward-looking and it is inflationary. i think right now we have a situation where every time we have bad news sterling goes down and the bond market rallies. in fact, we should look more at the currency and say every time the currency is going down the bank of going to pull forward the rate hike. francine: when you look at the next phase of negotiation, how important is it that we have a finance minister in germany and proper government to know who the u.k. needs to -- the u.k. has always had the feeling that germany would help out at the last minute and i think merkel, in the october summit, merkel came up with these encouraging words.

he think about german businesses and their interest in having open access to u.k. markets. coalition talks continue in germany. we probably won't have a government when it comes to the december summit. .hat probably is a risk factor francine: we also heard from mccafferty of bank of england -- do we's worried have a timeline problem? emma: i think that's happening already. to waits are not going around. transition was never going to be good enough for them anyway. they've been scoping out office space in frankfurt for months. tom: thank you so much. we will continue with mr. nordvig. we hope you are getting briefed on economics. on the politics we see.

on radio, coast-to-coast and across canada. bloomberg daybreak. this is bloomberg. ♪

taylor: let's get to bloomberg's business flash. investors are showing disappointment in burberry. new ceo marco gobbetti gave sketchy details of a plan to move the brand upmarket.

the investment firm backed by austria's billionaire raymond family is expanding its food empire in the u.s. but itere not disclosed gives ja be about 200 cafes in the u.s. and another 100 overseas. bank of america's merrill lynch unit at it penalties designed to -- compensation formula for its financial advisors according to a document seen by bloomberg news. advisors can receive the cash pay bond of up to two pores best two percentage points if they .eet to targets sales could also be. but the two percentage points if they fail to meet minimum thresholds. is a really huge deal to american wall street. it almost goes into a mythic

discussion. fiduciary responsibilities where the major firms are trying to drive toward asset-based or fee-based management. a whole new round. a very subtle decision by merrill lynch. francine: very subtle decision. .t feels european sometimes you think there's a big gap between what the u.s. wants in europe. it can see it converging and things like that. tom: a developing story. what we know is at&t would like to merge with time warner. there's the phrase, we are going to court. , head of bloomberg intelligence. i was struck by the leadership of at&t saying we're going to court. how do you go to court against justice department?

this >> might be posturing on the part of the justice department's i suspect there will be heavy negotiations over the next 30 days because i think the clock has started. at&t feels like they have a very good legal position to stand on. they're pursuing a vertical integration. the doj has not blocked any material vertical integration. when's recent precedent comcast bought nbc universal. at&t feels confident in their position. tom: within the position is the drama of the russian dynamics. ,r. sessions and the president the white house, is this being directed by a third level employee? directed by the attorney general ? directed by the president? paul: we have the new head of the doj recently came on and is starting to look at this transaction and that is where it has taken a turn more against at&t. at&t is suggesting there's probably some type of political

undertones to this type of movement by the doj. the doj denies that. the potential remedy of woulding turner networks represent a vast majority of the value of time warner, just a nonstarter for at&t. i think they would be willing to do some smaller remedy. turner networks or direct tv, neither of which i think -- both of which i think would be a dealbreaker. francine: a significant week for a lot of these networks. we hurt sky news could be shut down if regulators block the fox buyout. is there a parallel to this story? paul: the sky deal is very interesting. the first century fox and the last legs of trying to get that deal approved. now you throw in the uncertainty

of potentially the walt disney company looking to buy some or all of 21st century fox. if walt disney company is serious about buying some or all of the assets of 21st century fox chief among them would be the sky asset. they would like to own sky primarily because disney is relatively underexposed to international media businesses. one of the attractive assets of fox would be the international media assets. francine: when did we find out more about this in terms of timeline? walt disney paul: reports earnings tonight. i'm sure there will be top of analysts desktop for analyst investors. this will be the next opportunity for us to get more data on that. tom: the focus on disney is on espn. there is the abc television network as well. as their discussion of nbc

mating with fox cable? we see that in the nbc combine and others don't have that like cbs. is that part of this discussion, abc mating with fox? --l: when you think about the abc company is a lower value component of the entire enterprise value. inc. the cable networks or broadcasting business, media networks for disney it's about espn, number two is the disney cable networks in the broadcast network is generally number three. the broadcast television business is a healthy business. retransmission revenues and you have to look as far as cbs to see how good that stock has been and that is essentially a theycast network. tom: burn incense and other things you do. within that is the day-to-day battle with apple. i held the iphone ask for the first time. i was stunned at the quality of

the screen. what have you learned in the last 24 hours about this new toy? with whenever they come up an upgrade or new version it's a question of is it a minor tweak or a significant upgrade. i think this qualifies as a significant upgrade. salesr driver of handset in the feedback has been positive. tom: we covered a lot on the media. tv go, one of our great advantages. you can steal charts from jens nordvig among others. look at tv go. you can come over here, bring it up and you can steal trade weighted euro and dazzle them at your 10:00 a.m. meeting. ♪

francine: coming up, bloomberg daybreak americas with david westin, jonathan ferro and alix steel.

david joins us now. i know you have and morrison on the back of that great interview yesterday. morris, one of our favorite guests. we will talk about oil, how it got to that lofty height in its price. we talk about shale, we will learn about tonight at 9:00 on alex's special. a great special tonight. oil and shale and we squeeze in my exclusive interview with michael corbett, citigroup ceo. tom: really interested in the citigroup interview. franc.best chart, swiss we do that with jens nordvig. a beauteous thing as swiss franc go, there isn we january of 2015 where the swiss national bank gives it up. why is the safe haven that flow of money into switzerland, why has it drifted away? we got extremely far.

an epic move. incredible strength we had over those crisis years. we got too far and now some of the reasons to really fear about the situation, european growth is better and what we are also seeing is there are some carry starting to build in the united states. there was a period where all interest rates mg 10 currencies or zero. tom: what does s and b want. want as ans snb outcome? jens: they want to have a non-deflationary situation. they want to have a currency back above 120 against the euro. if they got to 125 they would be happy. thisre going to support weakening trend we've seen over the last six or seven months.

francine: what will be the biggest shift in monetary policy in monetary policy and 2018 and the impact that will have on europe? francine: are we going to get any inflation at all? we are having better growth, better labor markets, but where are we going to get the inflation? the trick is to pinpoint the specific places with her is going to be inflation and were policy is going to be normalized. we see it in eastern europe, the u.k.. who is going to be next where the normalization will be driven by higher inflation? francine: do you think inflation is coming or are we reading it wrong? jens: i think we see pockets of it but it's unclear in the u.s. with the trend is the next couple of months. i don't we see it in the short-term but pockets of inflation, eastern europe is one, the u.k. is one. tom: you wrote the fall of the euro. rewrite the fall of the euro right now?

jens: the key issues that i wrote about back then his we could have political risk that could take the euro down. these are the key events. better still the case. how worried you need to be? an election coming up next year. i'm not super scared of it. it's a degree of concern. i think the refugee issue has been important to europe. that came after my book. key to the political future of europe. much.hanks so we continue. a foreign exchange report. we need to do china. this is bloomberg. ♪ retail.

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trade with china, putting the blame on leaders for allowing integral. goldman turning around sales. the biggest share of this year's promotions. at&t has a message for the justice department, we want time warner and where not willing to sell cnn to seal the deal. good morning. this is "bloomberg daybreak." i am jonathan ferro alongside david westin. and alix steel. all-time high close yesterday. futures down a third of a percent. fx showing broad-based weakness for the dollar, up by 4/10 of 1%. commission of eu forecast in the best growth in a decade. treasury yields coming in by a single basis point on a u.s. 10 year. that curve has been flat for some many days. just a little bit steeper in today's action.